Chevron acquires PDC Energy for US$7.6 billion

Chevron is acquiring PDC Energy in an all-stock transaction worth US$7.6 billion. This is Chevron's first oil and gas deal since acquiring Noble Energy in 2020. Many had been wondering when the company would return to the M&A market given its strong financial position. At the end of Q1 2023, the company had US$18 billion of cash on its balance sheet and a gearing ratio of just 3%. Although the deal was an all-stock transaction, Chevron is planning to spend US$17.5 billion on buybacks this year which will more than offset the additional shares issued. We value PDC's assets above the transaction price, though the transaction price represents a 14% premium to PDC's ten day trailing share price.